February 7, 2013The American
Association of Individual Investors, AAII, publishes a
weekly survey of their members to generate a weekly
Bulls, Bears and Neutral set of data points. The AAII
Sentiment Survey has been conducted weekly since July
1987 and asks AAII members whether they think stock
prices will rise, remain essentially flat, or fall
over the next six months. The survey period runs from
Thursday (12:01AM) to Wednesday (11:59PM). Only
one vote per member is accepted in each weekly voting
period. Member responses:

Bullish
means they expect stock prices to rise of the next
six months.

Neutral
means they expect stock prices to remain
essentially flat over the next six months.

Bearish
means they expect stock prices to decline over the
next six months.

For the
week ending 2/6/2003

AAII
Sentiment Survey results:

Bullish: 42.8%

Neutral: 27.7%

Bearish: 29.6%

Historical "Long-Term"
Averages are:

Bullish: 39.0%

Neutral: 30.5%

Bearish: 30.5%

I find the weekly bulls and bears data is far too
noisy for meaningful analysis so I calculate the 4, 10
and 52 week moving averages (MA) of the difference
between the bulls and bears. The 52-week moving
average eliminates seasonal factors that distort the
data from seasonal effects such as "STS
Seasonal Timing Strategy" and "Sell in May and
go away."

You can see from my chart above of the
various AAII averages vs the DOW (DJIA
charts & quote) that:

the
52-week MA of sentiment peaked in early 2011 then
fell until the start of 2012 before moving higher.

the
4-week MA of sentiment fell from early 2012
through today where it is now in the rare negative
zone.

Charts of the AAII (American
Association of Individual Investors) Bulls minus
Bears Index versus the market are key sentiment
indicators for stock market technical analysis.
Contrarian theory states the time to buy is when
fear and pessimism are at a maximum since this
usually occurs near market bottoms.